Albany Joins the Turf Battle: NY's Move to Regulate Prediction Markets

Update — August 15, 2026. Reviewed as of this date. The political contracts discussed below remain listed on [Kalshi](=AFF:kalshi) and [Polymarket](=AFF:polymarket); the widget above carries the live price. Polling figures cited in this piece are quoted verbatim from the pollster's own release and are not re-estimated by us.

Gothamist called it a turf battle, which is the right frame. New York is trying to do two things simultaneously: assert its own authority to license prediction markets that operate in the state, and defend that authority against a federal lawsuit arguing only the CFTC gets to regulate event contracts. Both moves landed inside ten days in May.

The Addabbo bill: state license, state cut

State Sen. Joseph Addabbo, who chairs the Racing, Gaming and Wagering committee, has been the loudest Albany voice on prediction markets all year. His pitch, in his own words: "The harder thing to do is regulate." His bill would create a state license for prediction-market operators serving New Yorkers and route a share of revenue back to the state — the same template Albany used for online sports betting in 2022.

We covered the early version of this in our Albany license piece. The May 2026 update: the bill is now advancing in committee, and the political climate around it has hardened. The CFTC lawsuit, the suspicious-trade headlines on Kalshi and Polymarket, and the Mamdani mayoral campaign's interest in markets have all made the topic visible in a way it wasn't last winter.

The Third Circuit just made the federal case harder

On April 6, the Third Circuit ruled in KalshiEx LLC v. Flaherty that the Commodity Exchange Act preempts state gambling laws as applied to sports-related event contracts traded on CFTC-registered designated contract markets. It was the first federal appellate court to reach that conclusion.

Forbes and the Holland & Knight Law360 analysis (May 12-13) both flagged the same takeaway: that ruling makes it materially harder for New York to argue its gambling laws should apply to Kalshi's sports contracts. If the Second Circuit follows the Third — and it often does on commercial regulation — the CFTC's preemption case against New York gets stronger, and Addabbo's licensing bill gets boxed in.

Who regulates prediction markets in New York?

As of May 2026, the honest answer is: nobody has a clean victory. Kalshi operates under CFTC jurisdiction as a designated contract market. The New York State Gaming Commission has argued that some prediction-market contracts cross into state-regulated gambling. The CFTC has sued New York in the Southern District to settle the question. The Third Circuit has weighed in on the federal side. The Second Circuit hasn't yet.

Functionally, New Yorkers can use Kalshi and Polymarket today. Whether they'll be using them under a federal regime, a state regime, or both depends on rulings and bills that are all live in the next twelve months.

What to watch next

• —Movement on the Addabbo bill in the Senate Racing, Gaming and Wagering committee.
• —Any procedural ruling in CFTC v. New York in the Southern District of New York.
• —Whether the Second Circuit takes up a preemption case in line with the Third Circuit's Flaherty ruling.
• —The Trump administration's posture — so far it has defended prediction markets as financial products, not gambling.

Addabbo's quote sits at the center of this story for a reason. Banning is loud; licensing is slow. New York is trying the slow version, on a clock set by federal courts.

Editorial only. See our full New York legality guide and the question most readers actually arrive with: is Kalshi legal in New York?